The Federal Open Market Committee held the funds rate in its 0% to 0.25% range at its January meeting and "most of the words were the same as in the December press release, but rearranged," reports David WYss, managing director for Standard and Poor's. “The committee continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time," according to the FOMC report. It continues to see that “the economy has weakened further” and now believes “global demand appears to be slowing significantly.” It also stated that “inflation pressures will remain subdued,” and that “inflation could persist…below rates that best foster economic growth and price stability.” "But rates are as low as they can go, so the Fed will continue to intervene in other security markets," says Wyss. "The problem isn’t the level of interest rates to banks or the Treasury, but rather borrowing costs for businesses and individuals. As a result, it intends to employ all available tools, implying continued purchases of private securities such as mortgage-backed securities and commercial paper, in order to keep financial markets functioning." For the first time, the FOMC also said it is “prepared to purchase longer-term Treasury securities” if needed to cut long-term interest rates, he says. "There was one dissent, as Richmond Fed President Jeffrey Lacker said that he would prefer to operate only in Treasury securities. I tend to believe that the majority is correct, and that the problem is credit spreads, not Treasury interest rates. The private economy is moved by the cost and availability of private borrowing, not public debt costs."
Recommended Reading
Halliburton Sees Tighter Market as E&P Consolidation Continues
2023-10-24 - Jeff Miller, Halliburton’s chairman, president and CEO, said with a more consolidated market focused on returns and free cash flow generation, customers will look for value in oilfield service technology and efficiency.
CEO Darren Woods: Exxon’s Early Lithium Production Efforts ‘Promising’
2023-11-06 - The U.S. oil giant has quietly evaluated opportunities to produce lithium from subsurface brine water in Arkansas—a process Exxon says is an extension of its current upstream capabilities.
ONEOK Hammering Out Plans After Magellan Merger
2023-11-03 - Post ONEOK’s merger with Magellan Midstream, ONEOK executives pitched a flexible network during the company’s third quarter earnings call Oct. 1.
Energy Transfer Hits Record Volumes in 3Q, Pushes Expansions
2023-11-08 - Energy Transfer saw record NGL, oil and terminal volumes in the third quarter while integrating new assets and working on further expansions to its infrastructure.
Post Bankruptcy, Weatherford Revenues Up as Company Reinvents Itself
2023-10-30 - As Weatherford International crawls out of its bankruptcy hole, the company is finally starting to deliver results, CEO Girish Saligram says.